Italy announces package to fund public projects

MANAGING RESOURCES:The Italian PM assured the European Commission that Italy would stick to its goal of keeping the deficit at 2.9 percent of output this year

Reuters, ROME

Italian Prime Minister Enrico Letta on Saturday announced a package of measures to fund public works projects and cut red tape in a bid to pull the eurozone’s third-largest economy out of recession while respecting European budget limits.

Letta said the government would meet again on Wednesday and Friday to introduce further measures to simplify bureaucracy, loosen hiring rules and fight youth unemployment.

The decree law reduces some of the harshest penalties available to a much-hated tax collection agency, Equitalia, and streamlines the legal process for civil disputes.

“These are all measures that are needed to restart the country’s economy,” Letta said after a Cabinet meeting that lasted more than five hours.

They include a “significant impulse for many public works projects,” he said.

The decree frees up nearly 3 billion euros (US$3.99 billion) for public works projects this year, which will create 30,000 temporary construction jobs, the Italian Ministry of Public Works said in a statement.

The funds will be redirected from other projects that were not going to able to spend the money this year, Italian Public Works Minister Maurizio Lupi said.

About 600 million euros will go to improvements in the national rail network, 300 million euros for maintaining tunnels and bridges, 300 million euros for improving school buildings and 100 million euros for projects in small communities.

Electricity bills will be reduced by a total of 550 million euros in part by reducing the tax to fund renewable energy providers, Italian Industry Minister Flavio Zanonato said, without saying how much this would cost producers.

Letta, now in his second month as head of an uneasy right-left coalition government, is seeking to spur growth without increasing the budget deficit, already seen coming in just under the EU’s 3 percent of GDP ceiling.

Earlier on Saturday, Letta assured European Commission President Jose Manuel Barroso that Italy would stick to its goal to keep the deficit at 2.9 percent of output this year.

“Italy wants to keep its promise,” Letta said during a joint news conference on Saturday. “That means not racking up debt, but making economic, social and fiscal policy choices while parsimoniously managing public resources.”

Data so far this year point to a sharply widening fiscal gap, fuelling concerns that the deficit could significantly exceed last year’s level of exactly 3 percent.

Letta, a member of the center-left Democratic Party, is struggling to balance Italy’s commitments to the EU with coalition promises to cut taxes.

At the insistence of former Italian prime minister Silvio Berlusconi’s center-right, Letta has suspended a housing tax on primary residences and is also under pressure to block an increase in sales tax due to take effect next month.

However, Italian Economy Minister Fabrizio Saccomanni on Thursday said scrapping the housing tax on first homes altogether and permanently blocking the sales tax increase would cost 8 billion euros per year.

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